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Asia as the new tech antitrust battleground

Antitrust battles between technology companies are no longer the exclusive province of Western competition regulators. In Japan last year, Microsoft was among complainants prompting a further review of the Google/Yahoo Japan deal for search and search advertising technology. Japan’s Fair Trade Commission formally cleared the deal in December, but, under pressure from the parties’ competitors and customers, stated that it would continue monitoring how the arrangements would be implemented in practice. Elsewhere, Asia has witnessed antitrust scrutiny of major online services market mergers, a continued focus on IT and IP licensing by the Korean competition regulator, and emerging antitrust battles in China between Baidu and its rivals as well as between Tencent and Qihoo.

In this context, the announcement this month that two complaints had been filed with Korea’s Fair Trade Commission against Google does not come as a surprise. What distinguishes the Korean case, however, is that Google’s strength in online search is not at stake. Reflecting the success of the Google Android mobile operating system in Korea, the complainants - who run competing online search engines - allege that Google is leveraging its market power as a mobile operating system provider to gain market share in online search, where it has been less successful in Korea to date.

These recent competition complaints in the IT sector raise a number of challenges for competition regulators in Asia. With Asian consumers being prompt to adopt new technology, Asian regulators may need to depart from their traditional reliance on market shares when assessing market power in industries of rapid technological change. They will also face interesting issues of market definition raised by the complexities of the smart phone industry, including the competitive relationship between smart and feature phones as far as search is concerned, as well as the substitutability of subsidised and unlocked phones.

On 25 April, the Supreme People’s Court issued a draft Regulation on issues concerning the application of the law in hearing cases involving civil monopoly disputes for public consultation. Interested parties have until 1 June to submit their comments.

The draft regulation confirms the general principle of civil liability set forth in Article 50 of the Antimonopoly Law that parties shall be liable for any loss caused by their monopolistic conduct. It also clarifies procedural issues specific to civil proceedings instituted under the Antimonopoly Law, including the burden and standard of proof, matters of territorial jurisdiction, multi-claimant litigation and case consolidation, statute of limitations, and the relationship between the administrative and judicial enforcement processes. The Court also confirms that rights of civil action arise without having to wait for an antimonopoly agency to establish an infringement: both follow-on and stand-alone actions are permitted.

Concerning the burden of proof in civil Antimonopoly Law disputes, the draft regulation provides that plaintiffs must adduce evidence in support of their allegations relating to market definition and market power. It allows however the use of statements made by companies in their regulatory filings (including IPOs) as prima facie evidence of their market power. Concerning evidence of market power in particular, the draft regulation goes even further by reversing the burden of proof for public utilities (water, power, gas, etc.) and other operators providing their services under an exclusive licence. These companies will have to adduce evidence to the effect that they are not dominant on the market.As regards the agreements and restrictive practices listed in Article 13 (horizontal practices) and 14 (vertical practices) of the Antimonopoly Law, the plaintiff will bear the burden of establishing the practice. However the burden of proof is reversed when it comes to establishing that the alleged practices have had the effect of eliminating or restricting competition.

The draft regulation contains the first substantive guidance from the Supreme People’s Court on the Antimonopoly Law. The Court issued a Circular on carefully studying and implementing the Antimonopoly Law in July 2008, but that circular was limited to establishing the jurisdiction of the intellectual property courts over Antimonopoly Law cases and directing judges to familiarise themselves with the law.

The lack of guidance from the Supreme People’s Court to date has not deterred parties from making claims based on the Antimonopoly Law. According to the Chinese legal press, 43 cases have been heard by courts of first instance between the entry into force of the law and the end of 2010.

The above is an excerpt from our monthly Competition Report. More detailed commentary on these issues and other recent competition law developments in the Asian region is to be found in this month’s edition of our report available on a free subscription basis (see further below).